Top Technology events of the year, 2014

It is time again for the best technology events of the year. We have quite a lineup this year, including Sony, Aereo, net neutrality, Home Depot, and a few surprise guest stars.

As with prior years, the winner had to do something in the calendar year. The action had to involve information and communications technology. It had to be notable. And, finally, the award winner has to contain something that deserves a snarky remark. This is nothing to take seriously, and it is all in good fun.

As in past years, The winners of these awards win nothing at all except a little sarcasm and a bit of fleeting attention on this humble blog. There is a symbolic award. It is called a “Sally.” This is named for Sally Fields, who famously blurted out at the Academy Awards “You like me! You really like me!” Why is a technology award named for her even though she has no accomplishments in technology? Well, why not? The stakes are very low.

With no further run-up required, let’s get started.

1. The first Sally is for Original Script. It goes to Sony Studios – and, if you have a taste for the absurd, this story also wins for best dark comedy. No writer could have imagined this plot. This studio had been hacked a few years ago, but, apparently not learning any lesson, it failed to take standard precautions in its IT security – for example, the IT department did not encrypt its email password lists. Hackers released tons of confidential information, including lots of sensitive email. Then in a perverse blurring of the line between gossip and free speech, the Hollywood press pasted the confidential emails all over the online news – which, of course, will encourage another round of hacking of every other Hollywood studio. In a further plot twist, the hackers also included threats about a film being released by Sony, which includes a finale in which the president of North Korea is blown up. (Though in bad taste, this is supposed to be funny. Go figure.) Hey, no threat is too small for this studio! Sony gave theaters permission not to show the movie. After being criticized by many commentators, including President Obama, for letting free speech become the victim of online blackmail, the studio then reversed itself, deciding a few theaters could show the movie. Ah, this clear-thinking executive team then really pulled a good one, and decided to piss off those brave theaters by simultaneously releasing the film online for streaming. (Here is a quiz for moviegoers: where would you rather watch this film, in the safety of your own home or at a theater that might get blown up?) In some cities the patriotic left has rallied and made it their duty to see this second rate comedy in the name of not bowing to terror – what a publicity campaign! I can hardly wait to see what Fox News has to say about it. If that is not weird enough, then it just got plain weird. Somebody – the US government, Anonymous, or some serious hackers with an axe to grind? – did an old fashioned Denial of Service attack on all the servers in North Korea, rendering the Internet broken for the three dozen elite North Koreans who use it. Next thing you know the Cohen brothers will make a movie about all of this.

2. The next Sally is for the Best Supporting Actress in a selfie. The winner is Ellen Degeneres, whose star-studded selfie at the Academy Awards was retweeted two million times in two hours. It included Meryl Streep, Jennifer Lawrence and Bradley Cooper, among others, and the social media world could not get enough of it. This record surpassed Barack Obama’s tweet on election night that said “Four more years.” The volumes were so high that Ellen’s selfie crashed twitter. What a world we live in! Or maybe it is not so novel: after all, this shows, yet again, that the US cares more about its movie celebrities than its presidents. Here is a question for you. Look at the photo closely. How hard is it to find Dory in the photo? Can’t see her? Keep at it. Trust me. Eventually you will learn something by Finding Dory. Still can’t find her? Find Nemo first. Find him and you have found her. (That was way too much work for such a weak joke. Apologies.)

3. Speaking of comic security lapses, this next award is for Best Special Effects by a retailer. The Sally goes to Home Depot. This is also a story of a firm not paying attention and learning lessons from the events around it. Home Depot allowed itself to be the victim of a large credit card fraud – 56 million credit cards in total. Ah, but it was not the largest theft ever, because Target had already been a bigger target, with 70 million stolen. But, hey, why does security matter? Can’t all credit card holders merely pass the costs onto their credit card company? Ah, it is not that simple. Home Depot is in a competitive industry, and customers have a choice. Customers who feel unsafe will take their business to a place that makes them feel safer, such as Lowe’s, Menard’s, Ace Hardware, and plenty of others. Have you been to a Home Depot lately? The lines are so short the place could be renamed Home Alone.

4. And now it is on to the Best Actor in a legal thriller (or the worst if you do not like the outcome). Now that Apple and Samsung have stopped suing one another, high tech legal warriors have had to look outside of patent law, and, instead, look at copyright law! So Aereo gets this Sally. It lost its court case with the Supremes, 6 to 3. What part of Copyright law did they violate? Well, well, well, a typical Mission Impossible movie has a less convoluted explanation than this, so stay with me. This plot involves Aereo’s attempt to receive over-the-air signals of television programs and resell a service to homes. How did this work? Aereo hoped to help users escape their cable firm, where the charges are at a very high level. Aereo tried to find a new delivery method and escape retransmission fees from cable firms to content firms, which find their way into prices… How did it do that? Aereo asked, “Why can’t a firm just tap into that over-the-air signal?” Well, as it turns out, that might be illegal, according to US copyright law…. To avoid violating that law Aereo allocated a specific antenna for every household. Why did it have to be done this way? Um, stay with me… the answer has to do with an obscure part of copyright law that covers the conditions for paying retransmission fees, which the US Congress invented a few decades ago, but nobody actually anticipated that these retransmission fees would become as high as they have become, and Americans must have their football on Sundays, and it is the only reason most households still subscribe to cable, and if they could just find a way to get their sports over the air, then the entire US entertainment system would be toast…..Oh, this is too much! It is too convoluted. I give up! Can Tom Cruise just step into this plot and fix it? Please, please, please, can we change the channel?

5. Every year there is a special Sally reserved for Once-in-a-Lifetime achievement. The winner this year has to be in recognition of the 3 million comments received by the FCC about net neutrality. This is a record for anything the FCC has ever done. Heck, that agency is lucky if anybody other than two dozen lobbyists ever show up for their hearings. So can you imagine it? Three million comments?! What an illustration of participatory democracy! Isn’t that just awesome? Except for one little problem. To whom do we give the Sally? Do we give it to Tim Wu, who coined the term “Net Neutrality,” but could not win his race for Lieutenant Governor of New York? No, he has tenure, so it is not as if he is out of a job. Perhaps it ought to go to Tom Wheeler, the chairman of the FCC, who is bravely conducting this exercise in online democracy in the face of presidential pressure and Congressional opposition. No, because we could just as easily give it to Verizon, who brought the ill-conceived lawsuit that generated this crisis, in spite of the fact that the old net neutrality rules really did not hurt them at all. Or perhaps it ought to go to the intrepid computer linguists who tried to analyze the words in the corpus of 3 million comments. They sought to figure out the fraction of comments which were pro or against net neutrality. No, not them. As if there was any suspense on that question? Duh. I think the Sally really should go to Marty Parker. Who, you may ask, is Marty Parker? Retired engineer, grandfather to my niece and nephew, and all around online maven, Marty believes so much in digital democracy that he personally penned three comments himself for the FCC. He can receive the Sally on behalf of all the online idealists out there. (For the nit picky among you, this does not violate the rules about favoritism towards relatives. He is my brother’s father-in-law, and we are not related by blood. However, he does subscribe to this blog, and I am not above favoring loyal subscribers. So there. Way to go, Marty!)

6. Speaking of Obama, a special Sally this year has to go for most boring sequel. The winner is the Obamacare web site, Healthcare.gov. It went back up and, unlike its predecessor’s debut, it worked. Right away. And it kept working. Millions of people use it now and it just keeps working. No crashing. Just like any other web site. Ah, this is dull, nothing to see here. That is the problem with sequels. Once the story becomes routine it’s boring. Let’s move along.

7. Now it is time for the Sally that rewards the most obnoxious violation of privacy. Sadly, this seems to be turning into an annual award, and once again reminds us that free speech needs to be used responsibly. In other words, the winner (or loser) has to be the hack of the iPhone cloud that leaked naked photos of Kate Upton and Jennifer Lawrence, among others. Look, I just cannot maintain the snarky tone on this one. It is hard enough to be a celebrity, but not everybody is as shallow and attention-hungry as Kim Kardashian, and the online world should not presume everyone is a potential target for an immature joke. Why can’t online society let famous women retain what little of the privacy they have left? Please just leave these people alone.

8. Speaking of tasteless, now it is time for the Sally for the Worst Horror Movie of the year, and this year they get a special Red Queen award for taking “off-with-their-heads” too far and too literally and without enough makeup. Yes, this award goes to the losers at ISIS – or ISIL or the Islamic State or whatever they call themselves. They did something truly horrific, filming their beheadings and pasting them on YouTube for the world to see. Quite a few commentators have noted the irony of using modern Internet video technology to publicize such a barbaric action, marrying the best and worst of human invention.  Look, once again, it is difficult to maintain sarcasm on this topic. I think I speak for most civilized people in saying it would be ok if YouTube decided to ban beheadings in its terms of service.

(Ah, let’s lighten it up again, and change the tone. For a moment there I was becoming preachy. Yes, now and again, even your truly wishes we lived in a better place.)

9. Now it is time for matters of commerce, and every year a Sally has to go to the most interesting deal of the year. There were many candidates (e.g., Whatsapp or Nest). We are living in a boom time and the bubble has not yet burst, so there are surely more to come. But this year the Sally goes to… Markus “Notch” Persson, who had founded Mojang, along with Jakob Porser and Carl Manneh. Notch was the lead designer for Minecraft, Mojang’s big hit, which was recently sold to to Microsoft for $2.5 billion. Notch is widely admired online for his creativity and independence, and he has inspired a big online following. Quite a few users have admired the way Minecraft combined a zombie game with a sandbox creative game, and left it open ended enough so it appealed both to new users and experienced users (which is NOT an easy thing to pull off). Notch gives inspiration to programmers everywhere – if a company run out of Sweden can make it big, so can a company from anywhere. If that that is not enough, however, Notch gets the award for what he did next. He bought the most expensive house in Beverly Hills for $70 million, outbidding Jay-Z and Beyonce. Who knew? Even Swedish programmers prefer L.A.’s winter over Stockholm’s. Ah, California dreaming on such a winter’s day. Now there is a pretty little song for you.

10. Let’s end on an even more sarcastic note. Here is the Sally for the worse song of the year. It goes to Justin Bieber for being the second person to have a YouTube video downloaded more than a billion times, joining the Gangum Style video, which was the first to achieve this feat. Justin gets it for the song “Baby.” You may be wondering, “Why give it to Justin? Isn’t he a publicity hungry and spoiled rich little cutesy who is close to outstaying his welcome in the hearts of preteen girls?” Yes, but I think I speak for all parents of young daughters when I say that I am grateful to hear anything other than the songs from the movie, Frozen.  Thank you Justin. May pictures of your many pretty little cheeky punim continue to appear in the online gossip pages, and may it help to distract kids from singing a Disney song. (But, hey, come to think of it, yes, I do want to go build a snowman. It would be nice to get outside.)

Well, that is it for this year. Comments are welcome. Surely some notable events were missed.

And *sigh* now that I mentioned it, I cannot get those stupid little songs out of my head. Argh, we all just want to let it go.

 

My Daughter, Your Sparkler, On her Bat-Mitzvah

My dear Ilana Shira,

Before teenage life leads you to be too embarrassed to be seen with me, I would like to take a moment to discuss who you are and what choices you will face.

You are distinctive. If each of us has a delicate light inside of us, then you were born with a sparkler. It is not visible, but if it were, it would NOT be a roman candle or an ostentatious fireworks display with the cannons booming.

Rather, your light resembles the sparklers that chase the moon on Independence Day. It is more like an endless trick birthday candle that fizzles and flits unexpectedly left and right.

Though small, its effects are visible.

I can see your sparkler when you smile and when you dance, especially when you imitate a Whirling Dervish by circling on the kitchen tiles. I also see it when you delight in figuring out the math problem of the day, or show me a draft of your essay for school. I also can hear it when you sit in the backseat of the car, oblivious to everything else, and hum.

Many people have seen the effect of your sparkler on the soccer field. You dribble for a few steps,
focus, and pass to a teammate with a precise and selfless touch. It is wonderful to watch.

Your sparkler also informs your exceptional sense of fashion. It may come as a surprise to you, but socks do not have to contain silly patterns and bright colors to function properly. Your delightful playfulness with clothing will eventually cost your mother and I dearly, but please ignore our sighs. If beautiful clothes make the sparkler shine more brightly, then wear it.

If I might be allowed to say it, I also hope you learn someday that a true friend also can love you in a plain white t-shirt. Just saying.

Your sparkler appeared at the service today when you smiled, and when you sang the words of the Torah, and when you put your light voice to the Haftorah. You connected your sparkler to all those who have come before you.

Your mom and I are very proud of you.

Here is what I am trying to say. Your sparkler can inspire. Have the courage to act on its inspiration. Put it into words. If you want to offer a witty pun or any other warm and caring remark then do so. Give a smile to a friend, and offer a greeting, or a soft touch on the shoulder. A big gesture is also ok, like a hug or a high five. And do me a favor: don’t hold back in my presence.

Speaking of favors, it would be nice if – from time to time – you brought your sparkler to the breakfast table. Again, just saying.

Now for the avuncular advice: Your sparkler will burn more brightly the more you genuinely use it. As with dancing, practice makes action smoother. So use your sparkler when it does not matter; that will help you hear it during the moments when its inspiration can help you.

At the same time, using a sparkler often is not the same as using it well. It is evanescent and vulnerable, so it is ok to let it rest. It can be especially difficult to keep lit in the face of sustained adversity.

By the way, it is especially ok to let it dim a bit after sleepless nights with a baby. Again, just saying.

Finally, you will find in life that all sorts of behaviors and circumstances seem to be designed to discourage you from dancing in the direction your sparkler leads. There is no general principle to use, but please keep in mind that line from Hey Jude, “It’s a fool who plays it cool… by making his world a little colder.” You don’t have to be cold or cool.

Here is my biggest wish for you: I hope that someday you will trust someone enough so they see your sparkler in all its depth. Show them affection. Maybe you will get a close look at their light.

Let’s drink a toast to sparklers, and to the dance of life. L’chiam.

 

 

HuffPo and the Loss of Trust

You may not have noticed, but recently the Huffington Post has been the poster child for lack of journalistic integrity. The actual details may appear to be small to many people, but not to me. HuffPo has made a sloppy journalistic error, publishing a historically inaccurate story, and on a claim many experts have proven wrong. The organization does not seem willing to retract it. I will never trust this source again.

This post will get into the details in a moment, but this is a blog about digital economics, so let’s review the relevant economics. Let’s start with the economics of trust. Trust does not arise out of nowhere. Readers learn to trust a source of information. Said another way, trust arises because a new source invests in accuracy and quality. It is one of the greatest assets of a news source.

Trust is an unusual asset. It possesses an asymmetric property. It takes many little acts to build up its value, and very few bad acts to destroy it. Once lost it is also hard to regain.

As online news sources grabbed the attention of readers there has been concern about the loss of the type of quality reporting found in traditional news outlets. That is why many commentators have wondered whether online news sources like HuffPo could recreate the reputations of traditional newspapers and new magazines, who invested so heavily in journalists with deep knowledge about their topic. So went the adage: A high quality journalist could sniff out a lie or incomplete claim. A high quality reporter would defend the reputation of the news source. Readers trusted those organizations as a result of those investments.

That is also why journalistic integrity receives so much attention by managers in traditional newspapers. There are good reasons why newspapers react severely to ethical lapses and violations, such as plagiarism. Once trust is lost in a reporter, why would a reader trust that organization again? Why would a news organization put its trust further at risk by retaining that reporter? The asymmetries of trust motivate pretty harsh penalties.

So the concern went something like this: online news sources get much of their content for free or for very little money. That could be a problem because these sources do not have the resources to invest in quality reporting. How will they behave when quality suffers? Will readers punish them for lower quality material?

That is what gets us back to HuffPo’s behavior. Its reputation is on the line, but it is not acting as if it recognizes that it has lost my trust and the trust of several other readers. This behavior suggests it has not invested in quality, which aligns with the fears just expressed.

Now for the detail: HuffPo published a multipart history of email that is historically inaccurate. Yes, you read correctly. More specifically, a few of the details are correct, but those are placed next to some misleading facts, and these are embedded in a certifiably very misleading historical narrative. The whole account cannot be trusted.

The account comes from one guy, Shiva Ayyadurai, who did some great programming as a teenager. He claims to have invented electronic mail in 1978 when he was fourteen. He might have done some clever programming, but electronic mail already existed by the time he did his thing. Independent invention happens all the time in technological history, and Shiva is but another example, except for one thing. He had his ideas a little later than others, and the other ideas ended up being more influential on subsequent developments. Shiva can proudly join the long list of geeky teenagers who had some great technical skills at a young age, did some cool stuff, and basically had little impact on anybody else.

Except that Shiva won’t let it go. This looks like nothing more than Shiva’s ego getting in the way of an unbiased view.

Look, it is extremely well established that the email systems in use today descended from a set of inventors who built on each other’s inventions. They did their work prior to 1978. For example, it is well documented that the “@” in every email first showed up in 1971. Ray Tomlinson invented that. Others thought it was a good idea, and built on top of the @. We all have been doing it ever since. Moreover, this is not ancient history. Tomlinson has even written about his experiences, and lots of people know him. This is easy to confirm.

Though Ayyadurai’s shenanigans were exposed a few years ago, he persists. In the HuffPo piece yet again he pushes the story in which his inventions played a central place in the history of electronic mail. This time he has a slick infographic telling his version of things, and he managed to get others to act as shills for his story. He also now accuses others of fostering a conspiracy against his views in order to protect their place in history and deny him his. As if.  “A teenager invented electronic mail” might be a great headline, and it might sound like a great romantic tale, but this guy is delusional.

One teenager invented the fundamental insights that we all use today? No, no, and many times no. This is just wrong.

BTW, I have met some of these inventors, and interviewed some of them too (for a book I am writing), and, frankly, the true inventors deserve all the credit they can get. This guy, Ayyadurai, deserves credit for clever at a young age, and nothing more.

Look, if you do not believe me, then read the experts. Many careful historians have spent considerable time exposing the falsehoods in this lie. If you are curious, read this by Tom Haigh, a respected and established computer industry historian, or this and this and this by Mike Masnick, who writes the techdirt blog about various events in tech (such as Huffington Post). These two lay out the issues in a pretty clear way, and from different angles, so they cover the territory thoroughly.

Look at the dates of those posts. These falsehoods were exposed two years ago, and are online. This is not news. Because these two have done the hard work, it takes approximately fifteen to twenty minutes to figure out what happened here.

And that is where we are today. HuffPo published the BS about this guy, authored by a few shills. According to Masnick, who makes it his business to do this sort of thing, HuffPo has been informed of their error. Yet, HuffPo has done nothing to disavow their story.

If I had to guess, there simply is nobody at HuffPo with enough time or energy to check on the accuracy of a story. The staff probably has moved on to other things, and don’t want to be bothered with a little historical article. That is the thing about quality; it is costly to keep it up everywhere, even on articles few readers really care about.

At the end of the day, Huffington Post published another story, one among many, and on a topic – the history of electronic mail. Does HuffPo lose very much from publishing one historically inaccurate story? No, not really, only a few of us know the truth, and only a few of us are sufficiently disgusted and angry. HuffPo’s reputation will take a hit with only a few readers.

But I will never trust them again. They have lost my trust completely. It will be very difficult to earn back.

You probably guessed how this post would end, so here it is: I suggest that you should not trust HuffPo ever again. Maybe if enough people react to this stupidity, HuffPo will invest in some journalistic integrity. Or maybe they will just lose readers a little bit at a time on hundreds or thousands of stories, each with little issues, and die a slow death from their own carelessness. Maybe.

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

1:22pm, 9/6/2014

Post script: Sometime after this was written Huffington Post took down the offending material. That raises an interesting question about whether I should trust them again.  On the one hand, I totally respect them for acting. Let’s give them credit. On the other hand, those posts have been up for several weeks. I admit that it will be hard to lose this sense of skepticism. You can make up your own mind. SG

Baking the Data Layer

The cookie turned 20 just the other day. More than a tasty morsel of technology, two decades of experimentation have created considerable value around its use.

The cookie originated with the ninth employee of Netscape, Lou Montulli. Fresh out of college in June 1994, Montulli sought to embed a user’s history in a browser’s functions. He added a simple tool, keeping track of the locations users visited. He called his tool a “cookie” to relate it to an earlier era of computing, when systems would exchange data back and forth in what programmers would call “magic cookies.” Every browser maker has included cookies ever since.

The cookie had an obvious virtue over many alternatives: It saved users time, and provided functionality that helped complete online transactions with greater ease. All these years later, very few users delete them (to the disappointment of many privacy experts), even in the browsers designed to make it easy to do so.

Montulli’s invention baked into the Web many questions that show up in online advertising, music, and location-based services. Generating new uses for information requires cooperation between many participants, and that should not be taken for granted.

The cookie’s evolution

Although cookies had been designed to let one firm track one user at a time, in the 1990s many different firms experimented with coordinating across websites in order to develop profiles of users. Tracking users across multiple sites held promise; it let somebody aggregate insights and achieve a survey of a user’s preferences. Knowing a user’s preferences held the promise of more effective targeting of ads and sales opportunities.

DoubleClick was among the first firms to make major headway into such targeting based on observation at multiple websites. Yet, even its efforts faced difficult challenges. For quite a few years nobody ever targeted users with any precision, and overpromises fueled the first half-decade of experiments.

The implementation of pay-per-click and the invention of the keyword auction—located next to an effective search engine—brought about the next great jump in precision. That, too, took a while to ripen, and, as is well known, Google largely figured out the system after the turn of the millennium.

Today we are awash in firms involved in the value chain to sell advertising against keyword auctions. Scores stir the soup at any one time, some using data from cookies and some using a lot more than just that. Firms track a user’s IP addresses, and the user’s Mac address, and some add additional information from outside sources. Increasingly, the ads know about the smartphone’s longitude and latitude, as well as an enormous amount about a user’s history.

All the information goes into instantaneous statistical programs that would make any analyst at the National Security Agency salivate. The common process today calculates how alike one individual is to another, assesses whether the latest action alters the probability the user will respond to a type of ad, and makes a prediction about the next action.

Let’s not overstate things. Humans are not mechanical. Although it is possible to know plenty about a household’s history of surfing, such data can make general predictions about broad categories of users, at best. The most sophisticated statistical software cannot accurately predict much about a specific household’s online purchase, such as the size of expenditure, its timing, or the branding.

Online ads also are still pretty crude. Recently I went online and bought flowers for my wedding anniversary and forgot to turn off the cookies. Not an hour later, a bunch of ads for flowers turned up in every online session. Not only were those ads too late to matter, but they flashed later in the evening after my wife returned home and began to browse, ruining what was left of the romantic surprise.

Awash in metadata

Viewed at a systemic level, the cookie plays a role in a long chain of operations. Online ads are just one use in a sizable data-brokerage industry. It also shapes plenty of the marketing emails a typical user receives, as well as plenty of offline activities, too.

To see how unique that is, contrast today’s situation with the not-so-distant past.

Consider landline telephone systems. Metadata arises as a byproduct of executing normal business processes. Telephone companies needed the information for billing purposes—for example, the start and stop time for a call, area codes and prefix to indicate originating and ending destination, and so on. It has limited value outside of the stated purpose to just about everyone except, perhaps, the police and the NSA.

Now contrast with a value chain involving more than one firm, again from communications, specifically, cellular phones. Cell phone calls also generate a lot of information for their operations. The first generation of cell phones had to triangulate between multiple towers to hand off a call, and that process required the towers to generate a lot of information about the caller’s location, the time of the call, and so on.

Today’s smartphones do better, providing the user’s longitude and latitude. Many users enable their smartphone’s GPS because a little moving dot on an electronic map can be very handy in an unfamiliar location (for example). That is far from the only use for GPS.

Cellular metadata has acquired many secondary values, and achieving that value involves coordination of many firms, albeit not yet at an instantaneous scale suggestive of Internet ad auctions. For example, cell phone data provides information about the flow of traffic in specific locations. Navteq, which is owned by the part of Nokia not purchased by Microsoft, is one of many firms that make a business from collecting that data. The data provide logistics companies with predictable traffic patterns for their planning.

Think of the modern situation this way: One purpose motivated collecting metadata, and another motivated repurposing the metadata. The open problem focuses on how to create value by using the data for something other than its primary purpose.

Metadata as a source of value

Try one more contrast. Consider a situation without a happy ending.

New technologies have created new metadata in music, and at multiple firms. Important information comes from any number of commercial participants—ratings sites, online ticket sales, Twitter feeds, social networks, YouTube plays, Spotify requests, and Pandora playlists, not to mention iTunes sales, label sales, and radio play, to name a few.

The music market faces the modern problem. This metadata has created a great opportunity. The data has enormous value to a band manager making choices in real time, for example. Yet, the entire industry has not gotten together to coordinate use of metadata, or even to coordinate on standard reporting norms.

There are several explanations for the chaos. Some observers want to blame Apple, as it has been very deliberate about which metadata from iTunes it shares, and which it does not. However, that is unfair to Apple. First, they are not entirely closed, and some iTunes data does make it into general use. Moreover, Apple does not seem far out of step with industry practices for protecting one’s own self-interest, which points to the underlying issue, I think.

There is a long history of many well-meaning efforts being derailed by narrow-minded selfishness. For decades, merely sampling another performer’s song in any significant length led to a seemingly trivial copyright violation that should have been easy to resolve. Instead, the industry has moved to a poor default solution, requiring samplers to give up a quarter of royalties. With those type of practices, there is very little sampling. That seems suboptimal for a creative industry.

Composers and performers also have had tussles for control over royalties for decades, and some historical blowups took on bitter proportions. The system for sharing royalties in the US today is not some great grand arrangement in which all parties diplomatically compromised to achieve the greater good. Rather, the system was put there as a consent decree after settling an antitrust suit.

If this industry had a history of not sharing before the Internet, who thought the main participants would share metadata? Who would have expected the participants to agree on how to aggregate those distinct data flows into something useful and valuable? Only the most naive analyst would expect a well-functioning system to ever emerge out of an industry with this history of squabbling.

More generally, any situation involving more than a few participants is ripe for coordination issues, conflict, and missed opportunity. It can be breathtaking when cooperation emerges, as in the online advertising value chain. That is not a foregone conclusion. Some markets will fall into the category of “deals waiting to be done.”

 

The systems are complicated, but the message is simple. Twenty years after the birth of the cookie, we see models for how to generate value from metadata, as well as how not to. Value chains can emerge, but should not be taken for granted.

More to the point, many opportunities still exist to whip up a recipe for making value from the new data layer, if only the value chain gets organized. On occasion, that goal lends itself to the efforts of a well-managed firm or public efforts, but it can just as easily get neglected by a squabbling set of entrepreneurs and independently minded organizations, acting like too many cooks.

Copyright held by IEEE. To view the original, see here.

Did the Internet Prevent all Invention from Moving to one Place?

The diffusion of the internet has had varying effects on the location of economic activity, leading to both increases and decreases in geographic concentration. In an invited column at VoxEU, Chris Forman, Avi Goldfarb and I presents evidence that the internet worked against increasing concentration in invention. This relationship is particularly strong for inventions with more than one inventor, and when inventors live in different cities. Check out the post here.

 

The Fault Lines Along Fast Lanes

Until recently, a fast lane from a broadband ISP was a remote possibility in the US. ISPs had to give data equal treatment, regardless of the source, and could not offer faster delivery for a higher price while giving slower service as a default.

Although fast lanes were allowed by regulators a few years ago in the wireless networks, the carriers hesitated to offer them. In December 2013, AT&T Wireless broke with the norm and announced just such a program. FCC regulations forbidding fast lanes at landline broadband ISPs had also prevented them, but a January 2014 US appeals courts struck down those regulations.

Is that a good or bad trend? The answer depends on who’s talking. Critics of government regulation despise the rules forbidding fast lanes, whereas net neutrality supporters view the presence of fast lanes as a nightmare come to life.

Legal and political aspects of this topic typically get most of the attention, as do the implications for the variety of speech online. Most reporters find these aspects interesting, and understand them. However, the economics of fast lanes receives less attention. That is a surprise, because the economics is not very difficult, and it’s worth understanding. It illuminates the fault lines between many different points of view.

Mirrors and servers

The public Internet has evolved considerably since the days when the design for packet networks presumed that the message did not have to arrive at an inbox immediately. Users today prefer and expect speedier services. That goes for more than just IP telephony and video chat, where users notice the smallest delay. It also holds true for video, such as YouTube and many online games. Many providers believe it also affects the bottom line—namely, that users switch services if they do not get fast delivery of data.

Long before fast lanes became a real possibility, many participants in the Internet made investments aimed at reducing delays. For example, for some time now, Akamai has sold a well-known approach to improving speed. Their service also defines the first fault line, so this is a good place to start the discussion. Opponents to net neutrality ask why Akamai can operate a business to speed up data delivery but a carrier cannot.

Akamai’s service supports servers inside ISPs, closer to households. Any seriously large Internet content firm must buy these services, and it is considered a cost of doing business online. Many ISPs like working with Akamai, because their customers experience better service without much investment from the ISP.

That is not the only method for speeding up data. For example, Google has bypassed Akamai’s charges in many locations by building its own data network to ISPs. Netflix has recently sought to do the same, though it is not quite done (because it has not successfully negotiated a presence with every US ISP). Any gathering of more than three Internet engineers will generate discussion of even more potential solutions in the cloud. Amazon built a content delivery network with enormous geographic range. Microsoft has similar investments and aspirations, as does IBM. The list goes on.

That leads to the deeper question. The last few years have witnessed robust experimentation among distinct approaches to functional improvement, and these might be either complements to, or substitutes for, each other. Accordingly, carriers have had two roles. They act as a firm whose users benefit from faster delivery, and they act as a supplier that could choose to cooperate—or refuse to cooperate—with solutions offered by others.

When a carrier had no investments in fast lanes, it had every reason to cooperate with solutions offered by others. Will that change if the carrier has its own fast lane?

The answer defines a fault line between points of view. Some observers label this a possibility that might never arise. They want a regulatory response only when a problem emerges, and otherwise they anticipate that a regulator will err. Net neutrality supporters think regulators have an obligation to protect the Internet. Advocates worry that introducing fast lanes messes with a system that already works well. They do not trust carriers to cooperate with solutions that might substitute for a fast lane business or threaten an investment in some way.

Competition and monopoly

The next fault line has to do with the role of money. Defenders of fast lanes expect them to become a cost of doing business for content firms, and forecast that fast lanes will be profitable and generate more investment. Opponents have the same forecast about profitability, but a different interpretation. They worry that fast lanes will lead to an Internet where only rich firms can deliver their content effectively.

This concern tends to get plenty of press, and a few rhetorical questions illuminate the fault line. Will the default speeds offered by ISPs be good enough for startups or for small specialty websites? One side believes that the defaults will be good enough, whereas the other believes that fast lanes will lead ISPs to neglect investing in their slow services.

One’s point of view about the state of competition for ISPs has a big role in interpreting the role of money. Some believe a competitive ISP market would melt away most problems. Others argue that belief about competitive ISP markets is a fantasy and masks many dangers.

The belief in competition is not a belief in magic, so it is worth examining. Rather, this side views competition as a painful process. In competitive markets, customers substitute into alternatives if they do not like what a supplier does. Suppliers hesitate to do things that make their users angry. In other words, ISPs would compete for customers by offering better fast lanes. In this view, users would get angry if they perceived that carriers were slowing down content from firms they cared about, and angry users would find another carrier.

Where is the fault line? Recognize the two key factors that make ideal competitive markets operate well—namely, transparency and the availability of many user options.

Just about everybody is in favor of transparency, but not necessarily more of it if rules require it. Those with faith in competitive processes tend to see the merits in nothing more than a few light-handed requirements, such as programs to facilitate measuring the speed of different ISPs. The other side asks for much more, such as the publication of all fast lane contracts (more on that later).

As for the second concern about options, consider the key open question: Do users have many options available to them, or do they face de facto monopoly ISP markets? Once again, there are different beliefs about the preponderance of competition and monopoly found throughout locales of the US. Those who presume that competition is inadequate lack sympathy for leaving ISPs alone (versus those who presume it is adequate).

That also leads to different interpretation about how lucrative fast lanes will be. Supporters of fast lanes say that ISPs should charge whatever the market will bear, and competition will discipline pricing. Opponents say that the monopolies emerged from granting public franchises and use of public rights of way, and characterize high prices as misuse of utility franchises.

A classic debate about government merger policy also arises. Net neutrality supporters argue that fast lanes give ISPs artificial incentives to consolidate in order to increase their bargaining leverage with content providers, thus concentrating economic power in ISPs. Net neutrality opponents do not see anything wrong with large ISPs. In a competitive market, size is irrelevant.

Mixed incentives

The foregoing leads into the last fault line in discussions about fast lanes—namely, views about mixed incentives at carriers. A mixed incentive arises when a carrier distributes a service that substitutes for one available on the public Internet.

Many broadband ISPs have a thriving broadband service and provide video on demand, and make a pretty good margin on both services. Will most cable firms want to sell a fast lane service to Netflix at a low price? If the carrier did not make money on video on demand, then a carrier’s price for a fast lane for Netflix would be lower, and the same goes for entrepreneurial firms offering video services. That also begins to suggest the intuition behind the concern that cable firms will tilt their other actions against online video to protect their existing businesses.

Mixed incentives also come up in discussions about scrutinizing carrier contracting practices. To put this fault line in perspective, consider a hypothetical scenario: What would happen after a carrier sells a fast lane to, say, ESPN? Can anyone else expect the same terms, even Netflix? Yet again, one side argues that competition will solve these issues, and the other sees a need for regulatory intervention to make terms of fast lane contracts public.

A mixed incentive also can emerge when a carrier has an economic incentive to protect its partner’s business in which it gets a cut. In other words, is it okay if ESPN gets a better deal than Fox Sports because an ISP made a deal with the local team who competes with something done by Fox Sports? The same fault line as just mentioned: should competition solve this question, or should governments intervene to publish fast lane contracts? Should ISPs be required to give the same terms to all takers?

To summarize, the fault lines between perspectives hinge crucially on several beliefs about the economics. Forecasts depend on whether the observer sees a preponderance of competitive or monopoly markets for ISP services. They also depend on whether transparency resolves potential problems.

 

Copyright held by IEEE. To view the original, see here.

USPTO public hearing on Attributable Ownership.

Attributable Ownership Public Hearing in San Francisco on March 26, 2014: Testimony and Written Comments Invited

The USPTO announces a public hearing on Wednesday, March 26, 2014 at U.C. Hastings College of Law in San Francisco from 9 a.m. until noon to receive feedback about proposed rules concerning the ownership of patents and applications (aka “attributable ownership proposed rules”). The public is invited to attend the hearing in person or via Webcast. Additionally, the public is invited to give testimony in person at the hearing and/or to submit written comments about the proposed rules.

To request to give testimony, please send an email to: aohearingrequest@uspto.gov. To submit written comments, please email: AC90.comments@uspto.gov.

The attributable ownership proposed rules require that the attributable owner, including the ultimate parent entity, be identified during the pendency of a patent application and at specified times during the life of a patent. The goal of the proposed rules is to increase the transparency of patent ownership rights. More details about the attributable ownership proposed rules are available here: http://www.gpo.gov/fdsys/pkg/FR-2014-01-24/pdf/2014-01195.pdf

Hearing Logistics:
• Wednesday, March 26, 2014, from 9 a.m. until noon (PT)
U.C. Hastings College of the Law
Louis B. Mayer Lounge
198 McAllister Street
San Francisco, CA 94102

LiveStream Access Information:
https://new.livestream.com/uspto/usptopublichearing
An agenda for the hearing is available here: http://www.uspto.gov/patents/init_events/ao_agenda_san_francisco_3-26-2014.pdf

Podcast about bias and slant on Wikipedia

The web site, Surprisingly Free, organized a podcast about my recent paper, Collective Intelligence and Neutral Point of View: The Case of Wikipedia, coauthored with Harvard assistant professor Feng Zhu. Click here.

The paper takes a look at whether Linus’ Law applies to Wikipedia articles. Do Wikipedia articles have a slant or bias? If so, how can we measure it? And, do articles become less biased over time, as more contributors become involved?

Jerry Brito conducts the interview. This is sponsored by the Mercatus Center at George Mason University. In the podcast we discuss the findings of the research.

Click here.

The Irony of Public Funding

Misunderstandings and misstatements perennially pervade any debate about public funding of research and development. That must be so for any topic involving public money, almost by definition, but arguments about funding for scientific research and development contain a unique and special irony.

Well-working government funding is, by definition, difficult to assess, because of two criteria common to subsidies for R&D at virtually all western governments: specifically, governments seek to fund activities yielding large benefits, and these activities should be actions not otherwise undertaken by the private sector.

The first action leads government funders to avoid funding scientific research with low rates of return. That sounds good because it avoids wasting money. However, combining it with the second criteria does some funny things. If private firms only fund scientific R&D, where the rate of return can be measured precisely, government funding tends to fund activities where returns are imprecisely measured.

That is the irony of government funding of science. Governments tend to fund scientific research in precisely the areas where the returns are believed to be high, but where there is little data to confirm or refute the belief.

This month’s column will illustrate, with a little example, the server software Apache. As explained in a prior column (“How Much Apache?”), Apache was borne and invented with government funding. Today, it is rather large and taken for granted. But how valuable is it? What was the rate of return on this publically funded invention? It has been difficult to measure.

Google and Motorola in the Wake of Nortel

Google has announced a plan to sell Motorola to Lenovo for just under three billion dollars. Google paid more than twelve billion only two years ago, and many commentators have declared that this is Larry Page’s first big bet, and potentially his first big experiment to go sour.

Even the best reporters characterize the strategy incorrectly, however, and forget the motivation. The best recognize that the acquisition had several motives, but still use wishy-washy language to discuss the priorities. Here is the language of the New York Times, for example:

“The deal is not a total financial loss for the extremely wealthy Google, which retains patents worth billions of dollars, but it is a sign of the fits and starts the company is experiencing as it navigates business in the mobile age, which has upended technology companies of all types.

In addition to using Motorola’s patents to defend itself in the mobile patent wars, Google pledged to reinvent mobile hardware with Motorola’s new phones, and directly compete with Apple by owning both mobile hardware and software.”

I have a bone to pick here. Even the best reporters are not recalling the sequence of events. Public policy shares some of the blame, and viewed from that perspective, much of this looks like a waste of resources. Let’s get that interpretation on the table by doing a bit of a flashback, shall we?