As I May Think...

Comments on NYC Proposed Rules Limiting Residual Fuel Oil Use

2011-02-28T16:45:41-05:00

New York City held a hearing this morning on proposed rules to limit the use of No. 4 and No. 6 oil in the city. I submitted something similar to the comments below:

Sometimes, knowing why we do a thing makes it hard to understand all the reasons that we should do that thing. This is clearly the case with the proposed rules where the primary motivation for action is certainly a desire to reduce the crippling pollution generated by the 1% of New York City buildings that burn filthy residual oil for heat, hot water and sometimes even air conditioning. However, even though the environmental and health justification for these rules is compelling, we tend to lose sight of the fact that converting from dirty, expensive residual oil to cleaner, cheaper natural gas will significantly reduce the cost of heating in our city and reduce our nation’s trade deficit. A reduction in wasteful expenditures on imported dirty oils will help to invigorate our local economy and ensure the availability of more affordable housing as a result of lowered pressure to increase rents and maintenance fees while keeping more of our money in our domestic economy (while oil is largely imported, natural gas is primarily a domestic product).

Comments from the NYU Institute of Policy Integrity teach us that: “moving  all  boilers  from  dirty  residual  oil  to  natural  gas  would  likely  save  259  lives  per  year.” Over  a  thirty‐year  period, “ in  excess  of  $22  billion  worth  of  health  benefits  could  be  generated.   The  move  would  also  deliver  up  to  $6  billion  in  climate  benefits  over  a  thirty‐year  period.” In addition to these savings of lives and money, a conversion from residual oil to natural gas will also bring dramatic reductions in the cost of heating our buildings. These savings could reach as high as $450 per year for every apartment or unit that is currently heated by residual oil in the city’s 10,000 Dirty Buildings. Given savings of this magnitude, it would make sense for our city’s Dirty Buildings to convert to natural gas even if there were NO environmental benefits.

Gas is and will stay significantly cheaper than oil for the foreseeable future. Forecasts by the EIA, ConEd and others show that the burner-tip cost of natural gas can be expected to stay in the range of $13 to $15 per million BTU over the next 10 to 15 years while the cost of oil will, at best, be between $20 and $25 per milllion BTU. Additionally, one should consider that when buildings convert from oil to natural gas, they typically also improve their energy management systems and thus gain between 15% and 20% additional efficiencies.

Many have noted that the costs of converting to natural gas are higher than the cost to convert from No. 6 to No. 4 or to No. 2 oil. This is certainly the case. However, it is important to look beyond the simple up-front costs and also consider the financial benefits of conversion. Converting from oil to natural gas is the only option that will result in a reduction of monthly heating bills. In most cases, the savings will be sufficient to payback the up-front costs of conversion in between 1 and 5 years. For a building that has an average up-front conversion cost of $100,000 but that gets $25,000 per year in savings by burning natural gas instead of expensive dirty oil, the payback period will be only four years and the building’s owners will enjoy a 25% simple Internal Rate of Return over the 34 year life of the new equipment. (The IRR will be higher if depreciation is considered.) There are very, very few investments available today that offer such a high rate of return.

The savings that come from converting to natural gas will be particularly valuable to the over 440 school buildings in our city that currently burn residual fuel. As everyone knows, the school budget is under tremendous pressure and we’re faced with quality cuts and teacher layoffs. Converting our schools to cheaper, cleaner natural gas would not only reduce the pollution that aggravates our children’s asthma and respiratory issues, it would also make available a savings stream that can fund much needed capital improvements, school books, or teacher’s salaries.

Some have argued that rather than converting to cleaner oil or to natural gas, our Dirty Buildings should take the more radical step of immediately switching to renewable fuels. However, the unfortunate reality is that we simply don’t yet have renewable systems that can be deployed rapidly enough to avoid the tremendous loss of life (259 lives per year) that is caused by our 10,000 Dirty Buildings and we don’t yet have technologies that can result in the kind of savings that natural gas offers. But, converting to natural gas now doesn’t prevent adopting more sustainable systems in the future. In fact, it might make such adoption easier!

Given that a conversion to natural gas is paid back in only 1 to 5 years, doing such a conversion now will provide an annual savings stream of hundreds of millions of dollars. If renewable technologies become more viable than they are today, some of our more responsible buildings should consider using accumulated savings to fund experiments with more sustainable technologies such as solar thermal, photo-voltaic or ground source heat pumps.

Some have suggested that commodity price forecasts are inherently suspect and thus we shouldn't be too swayed by the overwhelmingly consistent expert opinion that gas will remain at least $5 per million BTU cheaper than oil. Certainly, all predictions are fragile. However, in a world where we have reached “peak-oil” (i.e. world-wide oil production will never be as high as it has in the past), where energy demand continues to increase and where oil supply is susceptible to the slightest turmoil in the Middle East, Central America or Africa, we can be sure that the price of oil will do nothing but rise and fluctuate widely. Also, all indications are that even without expanding natural gas production to those parts of the Marcellus Shale that impinge on New York City’s water supply, there is and will continue to be a good supply of domestically produced natural gas available to our city.

The best outcome for our city and the one that gives buildings the most control over their energy costs would be for our 10,000 Dirty Buildings to convert to “dual-fuel,” interruptible natural gas service. This is easier than it would seem to be since over 7,000 of the Dirty Buildings already have dual-fuel burners installed even though they currently only use their burner’s oil capabilities. (Enabling gas use will require adding a gas train to the existing dual-fuel burner.) Well managed buildings should convert their oil tanks from residual fuel to the cleaner No. 2 oil and then use the cheapest fuel, natural gas, as their primary fuel. In the future, if natural gas ever becomes more expensive than oil, or if the supply of natural gas is insufficient to meet needs, buildings would simply switch their burners from gas to oil until the price or availability of gas is once again favorable. Additionally, buildings should consider funding additional energy efficiency measures and technologies with at least part of the post-payback savings stream that results from converting to natural gas. In this way, buildings will be able to have much greater control over their costs and will find themselves much less susceptible to market fluctuations -- either domestic or foreign.

In summary: These 10,000 Dirty Buildings are not only polluting our air, they are wasting money. Converting from oil to natural gas will not only save lives and contribute to cleaner air, it will also ensure more affordable housing, help reduce our nation’s trade deficit, and provide a stream of savings that can contribute to experimenting with more renewable, sustainable energy systems. These conversions are certainly justified by their environmental and climate impacts, but we should recognize that they are ALSO very well justified on their cost savings alone.

The Rent is Too Damn High! (and it is going to go higher)

2011-01-30T14:23:06-05:00

The rent is too damn high and it will go higher as the owners of almost 10,000 buildings in New York City who today waste money heating with expensive No. 6 bunker fuel rush to convert to the even more expensive No. 4 or No. 2 oil in response to new city regulations prohibiting the use of No. 6 oil after 2015. If building owners converted to natural gas instead, the cost of heating their buildings would be reduced substantially, rather than increased, and the pressure to raise rents and maintenance fees would be reduced.

Unfortunately, landlords often don't care how much it costs to heat a building since they simply pass these costs to their tenants either as part of the rent or in monthly bills. The tenants, who pay the unnecessarily high heating bills, rarely have enough say in building management decisions to prevent their being saddled with the full costs of building management's wasteful decisions. Ideally, landlords would realize that lowering the percentage of tenant's money that goes to paying for heating gives the landlords opportunities to increase their profits...

Press coverage in the New York Times and other papers has focused on the fact that converting from No. 6 to No. 4 oil can usually be done for less than $10,000. What they don't mention is that No. 4 oil is more expensive than No. 6 oil... Thus, such a conversion not only costs $10,000 but also results in permanently higher heating bills. A vastly better alternative would be for buildings to convert from oil to natural gas. Although the upfront costs of conversions to natural gas are higher, they often result in fuel bill reductions of between 20% to 30% per year! For buildings that are burning thousands or gallons of fuel oil every year (only the largest buildings are burning dirty No. 6 or No. 4 oil today), a conversion from oil to natural gas will result in annual savings that range from $50,000 to 100's of thousands of dollars every year.

The savings that result from converting to natural gas are high enough so that the conversion costs are usually paid back after only one to five years. As anyone familiar with interest rates will recognize, the financial return (Internal Rate of Return) from such an investment in cheaper, cleaner fuel is much better than any reasonably safe investment in the stock or bond markets. Only a building owner who is an unaware of the excellent financial return or who simply doesn't care how much tenants pay for heating would refuse to see the wisdom in converting to natural gas instead of oil.

Of course, even if owners really don't care about the money being wasting, one would hope that they might care about the foul pollution (black smoke) that heating oil produces. These buildings aren't just wasting money, they are killing people! The particulate matter pollution (soot) produced by these 10,000 buildings (only 1% of all buildings in the city) is greater than that which is produced by all the cars and trucks in New York City combined! According to an in-depth study by researchers at NYU, burning bunker fuel for heat rather than natural gas results in over 250 additional annual deaths from respiratory disease as well over $700 million per year in health related economic expenses -- and those estimates don't include the impact of having thousands of buildings save money by using the cheaper natural gas instead of the more expensive oil.

It is clear that natural gas is not only the cheaper heating fuel in the long-term, it is also much cleaner. Unfortunately, it appears that unless community and tenant's groups work hard to encourage conversions to natural gas, many buildings are going to do what is cheapest in the short term and ignore the long-term financial and health benefits of switching away from oil. Thus, NYC's buildings will get a little bit cleaner, they will be dirtier than they have to be and they will waste even more money every year than they do today.

We'd all be better off if all 10,000 dirty buildings in New York not only quit number six oil but also converted to natural gas. If they did, then one day, the rent wouldn't be so damn high!

Can Social Media replace News Media in Newark?

2009-12-03T16:27:59-05:00

At a CommonGood lunch meeting today, I asked Cory Booker, Mayor of Newark NJ, if the decline of the mainstream media has made it harder for him to engage with his community. He responded that while he felt that journalism was very important to democracy and society, its recent decline has had little impact on him since he has been able to use social media technology such as Facebook, Twitter and YouTube to build direct, personal and often real-time connections with his constituents.

Today, although Newark NJ has fewer than 300,000 citizens, Mayor Booker has almost a million followers on Twitter, almost 17,000 supporters on Facebook and 550 subscribers to his YouTube channel. Booker regularly posts status updates to both Facebook and Twitter and has uploaded 75 videos including a regular "Week In Review." He regularly posts updates to his schedule, links to speeches he's given, quotes from things he's been reading, calls for participation in "Night Patrols" of Newark's streets, and kudos to local organizations whose work he admires.

Mayor Booker's comments reminded me that at the recent FTC Workshop on the future of journalism, Matthew Gentzkow of the University of Chicago presented research on "The Effect of Newspaper Entry and Exit on Electoral Politics." His research, which spanned the period from 1869 to 2004, indicated a fairly weak connection between the health of newspapers and electoral participation. He concludes that "monopoly paper closings may cause small to moderate declines in local [electoral] participation" and that there was "no evidence that newspaper closings will affect party vote shares or incumbency advantage." This evidence, combined with the personal experience of Mayor Booker, may indicate that communities are much more robust in their ability to obtain the information needed to sustain political and community engagement than some may be suggesting. Perhaps, just as on the Internet where we tend to "route around" anything that impedes the free flow of traffic, communities also find ways to route around forces that would otherwise limit discourse. Thus, it may be that rather than assuming on faith that it is vitally important to prop up and sustain the existing newspaper businesses, we should be seeking instead to determine what other tools and/or media best provide the platforms for discourse and engagement that we need.

bob wyman

PubSub.com V2.0 is live Under New Management

2009-11-18T07:06:56-05:00

Well, it seems that PubSub.com is live again -- over three years after we took it down and handed all our assets over to our creditors in June of 2006. Frankly, I've been wondering what has been taking the new management so long to relaunch the system. PubSub.com was the first "real-time search" engine on the web and given all the attention that real-time search has been getting over the last few years, it is amazing that more effort wasn't put into getting the service retooled and up sooner. Although PubSub V1.0 was widely recognized as the first in its field (even though few people at the time recognized the importance of that field...), PubSub V2.0, as a late entrant into a crowded field, may be seen as simply "yet-another" real-time search engine...

I have no idea if they are using any of the old PubSub.com code but would be surprised if they weren't. The prospective search system that we built for PubSub was the best technology in the market at the time and probably would still be the best among those systems that are currently in public use. In any case, PubSub V2.0 is a somewhat different offering than PubSub V1.0 was. They have added a traditional retrospective search system (we had been experimenting with Lucene for that) and they are now provide streaming updates to HTML pages (something that we had implemented with technology from KnowNow, the company that first popularized "hanging GETs" and with whom we had been planning to merge. Unfortunately, issues caused by a disgruntled ex-employee and apparently irrational investors caused us to cancel the merger and close shop before exposing the live-update capability.) -- PubSub V1.0, as released, had only provided real-time updates via Atom/RSS feeds and XMPP PubSub streams. I can find no evidence of support for syndication feeds or XMPP on PubSub V2.0

It will be interesting to see if PubSub.com V2.0, after so many years of letting the competition get ahead, will be able to build a market for their service. They have lost the "first mover" advantage, but may still be able to have some success. Time will tell.

bob wyman
ex-CTO and founder, PubSub.com V1.0

ASNE sans "Paper"...

2008-12-17T01:29:10-05:00

The American Society of Newspaper Editors is planning to remove "paper" from its name and expand its membership to include editors of online-only news Web sites and journalism educators. (see the release)

Of course, this isn't the first time that a professional society has changed its name in response to changing technology. An example I'm particularly familiar with is the association that began life in 1943 as the "National Microfilm Association" or "NMA." In 1969, in response to a broadening in the technologies used by its members, the association changed its name to the "National Micrographics Association." Then in 1983, as the NMA's members began to focus more and more on digital, non-image data, the association changed its name to "Association of Information and Image Management." Apparently, the association is once again in the process of changing its name. In the future, they will be known as the "Enterprise Content Management Association."

Had the NMA insisted on sticking to the old "microfilm" name, it surely would have closed its doors years ago. Certainly, it could not have been seen to be working in the interests of its members... Each time the old "NMA" changed its name, it was in recognition that the scope and range of opportunities for its members had grown. I'm sure many in the newspaper business will see the loss of "paper" in the ASNE name to be a loss for the industry. Hopefully, they will learn, as have the members of the NMA, that this kind of name changing is a good thing -- a very good thing.

bob wyman

Newspaper Classifieds: A franchise lost.

2008-06-01T12:58:32-04:00

In the early 90's, and for some time afterward, the newspaper industry had an opportunity to lead in the development of online classifieds and, in a number of forums, I actively encouraged them to take the opportunity... Today, I argue that they shouldn't put much effort into online classified ads. What made sense 15 years ago is no longer sensible.

In the early 90's, even as Internet technology was being rapidly deployed, there was still very little commerce on the Internet. The newspapers came to this new environment with an existing database of classifieds, relationships with vast numbers of advertisers, and a clear position in the minds of Internet users who had learned, through years of exposure to the paper-based pre-Internet world, that newspapers is where you went to find classifieds and job postings.

Given this opportunity, the newspapers could have not only maintained the revenue streams that then supported them, they could have vastly increased those revenues. What is the ad business of Google today, what is eBay or Monster today, could have been (some would say *should* have been) a business created, owned and dominated by newspapers. Of course, as we now know, the newspapers forfeited their historical franchise in classifieds and advertising. The result is that they will probably never recover from the loss of those revenue streams. As a secondary result of their forfeiture of these revenues, we, as a society, are now faced with the problem of finding an alternative means to fund and organize the paper-free dissemination of the news and information that we require. The newspapers have done more than just hurt their stockholders, they have failed the society that they once claimed they had a special duty and privilege to support.

But, by simply forfeiting the opportunity, it is probably the case that the newspapers simply sped up the working of inevitable economic processes. The advantage the newspapers once had was a temporary one based on the dynamics of an older and rapidly obsolescing technology. Their advantage wasn't rooted in any inherent binding between the business of journalism and the business of advertising. As such, it was always inevitable that news and ads would become distinct businesses.

The situation of newspapers in the early 90's was much like that of the many organizations that grew up as Internet Service Providers (ISPs). Those companies always knew that their opportunity was only temporary at best. It was always clear that the "proper" provider of Internet connectivity was either the phone or cable TV companies. But, since the phone and cable providers were slow to move, there was a temporary opportunity to profit from their lethargy. Thus, we saw the temporary growth (sometimes spectacular) of companies like AOL, Earthlink, and many thousands of others. Today, of course, inevitable economic processes have caused the "right" or "natural" thing to happen and the independent ISPs are consolidating or simply going out of business. Today, Internet connectivity is normally provided by those who have the cost, service and technology advantage -- the phone and cable companies... Nonetheless, quite a few sport cars, homes, and college educations were paid for by the revenues from those who took temporary advantage of the phone and cable companies' slowness to move. We have also seen the creation of a great number of companies based on what was learned by those who stood in temporarily for the phone and cable companies.

The classifieds and advertising business is very different from the business of journalism. Thus, one might wonder why the two were ever so closely tied. Of course, the connection was as loose one and, as we've seen, a fragile one. The connection between these two came about simply because both required access to the same limited, scarce resource -- the paper on which they were printed, the paper that was distributed throughout communities. What developed early in the history of newspapers was a pattern of printing what was really two publications in one. The paper was split into a news section (sprinkled with non-classified ads) and a printed database of classified ads in the back. Since both rode on the same paper, it was only those who owned the printing presses that owned both of these businesses.

Today, the channel is the Internet. Paper is dying rapidly. No one owns the Internet and access to it is essentially universal. As such, there is no channel-access driver that forces the classified ads and journalism to be owned in common. Given that there is no longer a natural binding between these two businesses, we can be sure that they would have eventually broken apart -- even if the papers had taken the opportunity that they once had to lead in online classified ads. We can also imagine that there would have inevitably grown up competition in classified ads from non-newspaper sources. For instance, we probably still would have seen businesses like eBay, Monster or Craigslist innovate in ways that newspapers didn't. The incumbent's inevitable efforts to expand their offerings to address competition would have, over time, caused those on the classified advertising side of the business to demand that they be set free of their bonds to the news side of the business. In time, we would have gotten to where we are today -- online journalism and online classified ads being distinct businesses. But, what would have been different?

Had the newspapers taken the opportunity to build serious classified businesses online, they would have also seen more clearly the opportunity and value in growing online audiences for news. The result, I'm sure, is that online news today would be very different than it is. We would have benefited from the best minds in the newspaper businesses spending the last 15 years thinking about how to do online news better in order to increase traffic to their revenue producing classified ads instead of what we got -- the best minds trying to figure out how to resist the pressure to go online and maintain their paper-based revenues. My bet is that if the papers had enjoyed years of the same online revenue streams that companies like eBay, Monster, etc. have seen, there would actually be far fewer paper-based newspapers today... The newspaper business would have learned long ago that better margins are found online.

So, where does that leave us today? Should the newspapers try at this late date to recover the online classified business? No. That would be, I am sure, a hopeless task. The opportunity is lost, the window closed. You can only fight economics temporarily and then only at specific moments in the development of an economy or market. The time for this particular battle is long over. For a newspaper to build an online classified business today would be sort of like someone building a new Internet Service Provider to compete with the phone or cable companies... It's just not worth the bother unless the technology is distinctly and greatly different.

bob wyman

Decentralized Twitter isn't hard.

2008-05-12T17:27:52-04:00

Cliff Gerrish writes on his Echovar blog:

The consumption strategy that makes the instant messaging model of Twitter work is to follow a core group and then track keywords of interest. Tracking keywords adds people you don’t follow into your stream and provides a proper level of noise and negative feedback into the information ecosystem. ... It’s tracking that makes a decentralized Twitter nearly impossible. ... This feature radically changes the shape of the social graph underlying the information stream. Since you don’t know who might use a tag you’re tracking, the regular RSS style contract around publication and subscription doesn’t work.

Gerrish's claim that tracking makes it impossible to decentralize Twitter seems to have convinced Steve Gilmore of Techcrunch who writes: "Decentralizing Twitter is unnecessary, if not impractical." Fortunately, both Cliff and Steve are wrong.

Distributed tracking of Twitter-like streams is easily accomplished using what are now well-known systems for distributed publish/subscribe. Certainly, it is easier to implement tracking if you have everything going through a single choke-point in the network, but it isn't necessary. In fact, as long ago as the 80's we had USENET based systems that handled the distributed fan-out of messages (news posts) that were then "matched" against user's local subscriptions (Yes, matching was normally trivial "topic-based" matching, however, "content-based" matching systems were often deployed locally). What we could do in the 80's we can do today -- but do it better. After all, we've learned a great deal since then.

Today, Twitter uses XMPP for both input and output. Via XMPP, Twitter offers topic-based "following" of tweets by pre-specified users and it offers content-based "tracking" of keywords and short phrases across all public tweets. Additionally, Twitter provides an experimental XMPP PubSub (XEP-0060) feed of all public tweets. Thus, almost all of what is needed to build a distributed Twitter is already in place. (Also, all that one needs to offer a "competitive" tracking offering is offered since anyone can get easy access to the full stream of public tweets.)

If Twitter thought that decentralizing their service was a good thing, then, as long as decentralization only dealt with "public" tweets and as long as they were willing to start with a crude system (to be cleaned up later), they would only have to do two things that they haven't already done:

Allow their users to "follow" Twitterers (?) that are hosted at other XMPP servers. (i.e. instead of following user "foo" on Twitter, you might follow "foo@jabber.org".
Accept a stream of "public tweets" generated by other XMPP hosts. This would allow Twitter to implement both topic-based "following" and content-based "tracking" of tweets generated off Twitter.

Of course, more elegant and efficient systems can be designed. But, a basic system is pretty easy to build. In fact, Twitter has already built most of it. However, even though the engineering delta might be small, the key thing that will probably keep Twitter centralized is Twitter's business plan -- whatever that might be... they probably see some advantage to keeping things centralized. Anyway, additional levels of capability would come from doing things like writing a quick "following" XEP (XEP= XMPP Extension Protocol) to permit the exchange of "follow" information between services (different than presence subscriptions). This "Following XEP" would enable directed messages and support private tweets. Once the following XEP was in place, XMPP services would probably adopt the convention that "tweets" should be sent to a standard local JID: "twitter".

Of course, not all XMPP servers would have the capability to do things like content-based tracking of tweets at high volume. But, this is the case with everything on the web these days. Heck, anyone can build a search engine if only they pick up a copy of Lucene, but building a search engine as powerful as Google's or Yahoo!'s is a very different problem. Thus, even if we had a distributed Twitter, it is likely that actual users of Twitter.com would get better service than the users of most other distributed Twitter services. Even over time, there would probably only be a small number of (well financed) players who could usefully support functions like tracking. Thus, we'd move from a Twitter monopoly to an oligopoly. Even so, it would be an improvement.

Distributed Twitter isn't hard -- it only requires the support of Twitter and some powerful partners.

bob wyman

Of Liquidity, Competition and Platforms

2008-04-14T11:28:27-04:00

Fred Wilson, of "A VC" recently sparked a great deal of controversy with his post: "We Need A New Path To Liquidity". Fred suggests that with the IPO market "closed," we now need new thinking about how to reward innovators for their work. Today, getting bought out seems to be the exit strategy that innovators build for, but buy-outs, while enriching those who sell, have tended to result in many innovative solutions languishing or being diluted in the process of assimilation into the purchasing organization. Luminaries such as Jeff Jarvis and Umair Haque have already commented on the main body of Fred's piece, so I'll limit my self to something he writes in response to comments:

Fred Wilson wrote:

The web is decomposing into smaller and smaller pieces And those pieces are sustainable as standalone opportunities

I think we'll find that these pieces aren't quite as sustainable as Fred would like them to be... Its a simple matter of economics.

As the pieces become "smaller and smaller," the barriers to entry are lowered and thus there are more opportunities to enter the market. Lower barriers lead to intensified competition, reduced differentiation and lowered returns for individual developers even as the overall market grows. In such a market, the qualities of your implementation eventually become irrelevant. Sustainability in such an environment comes from one of: lowered expectations, integration with a larger platform or branding. Getting bought out early is the best thing you can hope for...

Branding is ephemeral, lowered expectations tend to reduce the drive for innovation, and integration has a plethora of problems. It is hard to do, but even if done well, integration leads to the problem of the "whole being greater than parts." The result is that it is exceptionally difficult to evaluate the marginal contribution of an integrated part or component. Rewards to the component builders inevitably end up being determined by their negotiating skills or their luck -- not the true value of their work or their skill as innovators.

I learned a great deal about the "component economy" with ALL-IN-1 at Digital in the 80's. Then, I took what I had learned to Microsoft where I was Senior Product Manager for Applications Programmability in the early 90's (91-93). I used to explain to people at Microsoft on a regular basis that by building a platform that encouraged components (Visual Basic, COM, Active/X, VBA, etc.), we were "architecting monopoly" for Microsoft. (Note: I didn't say we should do these things in order to achieve monopoly, only that by doing these things, we would inevitably ensure monopoly. The difference is important.) The logic was simple. By providing ways that people could build components to extend Microsoft's products, we would lower the barriers to entry into the software market at the same time that we lead people away from competing with us. Innovators would focus on developing ever smaller components that produced sufficient rewards to motivate them but they would find themselves in a competitive marketplace that limited their returns and thus ensured that they didn't have enough revenue or energy to tackle competing with Microsoft itself. At the same time, as small developers built better components, those components would strengthen the Microsoft platform and made competition against the platform itself unthinkable. Developers would thank Microsoft for having created opportunities without realizing that the very opportunities that they exploited were precisely the things that made it impossible for them to ever aspire to grow as large as Microsoft itself.

Over time, the aggregation of innovations in any single component space would result in commoditization of the component. (i.e. dozens of small competitors, each trying to build a "better" component of type X would eventually define a "commodity" or standard implementation of the component.) Once a component was commoditized, the idea was that we would simply either build our own version of it or buy in one of the existing implementations. By packaging a component with the platform, we would remove it from the the realm of competition and force innovators to start the cycle over with some other component. (This consolidated the gains of past innovation into the platform and ensured that future innovation was focused on the remaining needs of the platform...) I always argued that the preferred approach would be to *buy* an existing implementation, and even to "over pay" for it, since to do so would invigorate developers by encouraging them to believe that one day they might be relieved of wearying competition by being bought out... The strategy seems to have worked for Microsoft, whether or not it was conscious... And, we're seeing the basic pattern repeating, perhaps less intentionally, in the Web 2.0 space.

As many others have said, much of what people are building today is "features" not products. As long as that is the case, raw economics is the real problem with the software business. Competition strengthens the platform builders while eviscerating the component builders... The rich get richer and the builders of innovative features must be satisfied with the "personal rewards" of doing a job well unless they get lucky in the buy-out lottery game.

It is important to note that while the economics of components and platforms has long-term negative consequences, in the short term the market's interests are served by this rough handling of feature/component innovators. Most customers want integrated, consistent systems and will prefer an integrated solution to a collection of "Best of Breed" implementations even if the integrated system is somewhat less powerful than a cobbled together set of Best of Breed solutions. Thus, the market drives us to integrate our components, yet, as discussed above, we simply don't know how to value and reward a component which is only a small part of a greater whole. Given that we have no model for valuing and rewarding component builders, we're lucky that large companies are willing to buy out "feature companies" and component builders. If developers couldn't look forward to such buyouts, they wouldn't have much motivation to innovate.

The alternative to building components is building platforms, but the market can never sustain more than a very small number of platforms at once -- given the way platforms work today... The platforms that "win" are typically the first in a space since platforms attract component builders and rapidly become too strong to attack. Thus, the only things you should take to IPO are platforms since they are they only things that are really sustainable (other than some classes of services, but that's another post.). And, the only opportunity you have to build platforms is when there is a major market disruption or when the platform defines a new market. Microsoft, Apple and Sun delivered the "Graphical UI" platforms. Google, Yahoo! and Amazon got the opportunity to build Web 1.0 platforms. Now, FaceBook and a few others are hoping that the "Social Web" or Web 2.0 is enough of a disruption to justify platform creation. (I doubt it...)

The "solution" to this problem lies in reducing the anti-innovative power of the platforms but without attempting the impossible which would be the elimination of platforms. I think the solution may be something like what we see in the Linux/Unix market or what we'll see once Google's Android takes hold in the mobile market. In the Linux/Unix market, the open nature of the base platform itself has removed it from the realm of competition at the same time that we see competition between packagers of the platform in the form of "distributions." (i.e. Red Hat, Gnu, Ubuntu, etc.) Each "distribution" contains a selection of components which have been integrated together to address the needs of one or another market. The result is much the same as the creation of a variety of platforms, all working on a common base and thus each platform being much easier to build (or package). As a result, there are more opportunities for component builders to find distribution and thus more opportunities for them to establish the value of their work.

Cutting this short..., in the future, I think what we'll see is a growth in the business of integrators and a growing importance of integration technologies as a source of profit and reward. If we value innovation, we'll hope to see a fragmentation of the market into clusters that build synergy around specific distributions of a common platform which has no market power of its own. For a software market to encourage sustainable innovation, there must be a variety of alternative markets for innovative components. The fewer the platforms, the less sustainable is the business of innovation.

bob wyman

3:00am Phone Calls: Genetic Testing for Presidential Candidates?

2008-04-03T10:32:37-04:00

In the recent debate over who would be best to answer 3:00am phone calls at the While House, most commentators have focused on the relative "experience" of Hilary Clinton, Barack Obama, and John MacCain. However, experience alone is the not the only measure of who is best to be hauled out of bed and faced with a crisis call. We should also consider basic elements of personality such as the degree of emotional response to stressful situations... Which candidate is most likely to answer the call with a level head and respond rationally, not emotionally?

Today, the NIH described research that finds a genetic factor in stress response variability. According to the press release:

Inherited variations in the amount of an innate anxiety-reducing molecule help explain why some people can withstand stress better than others...
Scientists led by David Goldman, M. D., chief of the NIAAA Laboratory of Neurogenetics, identified gene variants that affect the expression of a signaling molecule called neuropeptide Y (NPY)...
"NPY is induced by stress and its release reduces anxiety," said Dr. Goldman. ...
The researchers evaluated the NPY gene variants' effects on brain responses to stress and emotion. Using functional brain imaging, they found that individuals with the variant that yielded the lowest level of NPY reacted with heightened emotionality to images of threatening facial expressions. ...
In a preliminary finding, the low level NPY gene variant was found to be more common than other variants among a small sample of individuals with anxiety disorders. The researchers also found that low level NPY expression was linked to high levels of trait anxiety. "Trait anxiety is an indication of an individual's level of emotionality or worry under ordinary circumstances," explained Dr. Goldman.

So, will we one day be asking presidential candidates to submit genetic profiles so that we can objectively determine which is most likely to respond rationally and unemotionally to these 3:00am phone calls?
What sort of a world will we have once scientists are successful in working out the genetic code? Will genetic testing become a common criteria for a wide variety of jobs?

bob wyman

Am I a "Natural Born" American Citizen? (I think so...)

2008-02-29T17:06:54-05:00

Like Senator McCain, I am an American citizen born overseas to American citizens. As a result, I'm deeply and personally interested in the latest furor over whether McCain's birth in the Canal Zone disqualifies him from running for the US presidency. All my life, I've been told that because I was born in Germany I was a kind of "second class citizen," unable to even consider running for President.

Unlike McCain, whose father was in the military, my father was an American diplomat. Thus, I must admit that I'm not sure what to think about Senate bill S.2678, introduced yesterday in the US Senate by Claire McCaskill (D-MO). The bill is entitled: "A bill to clarify the law and ensure that children born to United States citizens while serving overseas in the military are eligible to become President." Of course, my question is: What about the kids of US Diplomats? What about the kids of folk that worked for Agriculture, Customs, FAA, CIA, or any of the many other US agencies? Are we somehow less worthy, less American, less good than the military kids? In fact, what about the kids born to US citizens who weren't working for the government at all? (Does the fact that one's parents worked overseas or had an unexpected birth while on vacation in the Carribean make one less of an American?)

I strongly encourage Congress to finally resolve the long standing debate over the quality of citizenship experienced by American kids born overseas. However, I feel it will be insulting and counter-productive if only the children of military families are to have their status clarified.

bob wyman