rosewater

From John Battelle’s Searchblog: Wikipedia and Search

Interesting. Wikis took off like weeds at work last year. The thing that’s been most valuable about the team wiki is that’s been a quick place to host a page that you need to share and possibly collaborate on. We *didn’t* get a a beautifully tended garden like wikipedia. I think it helps that wikipedia its modelled on an encyclopedia — the structure is simple and clear and there are clear ground rules for what an entry should look like.

The LA Times ran A Glut in the Market for Homes last week, an article about how much interest in being a real estate agent has surged.

I guess all those day traders had to find something to do. So, each agent gets an average of less that 1.5 sales a year. If the average house price was $500,000, and they kept all of their 3% (which they don’t), that’s $20k a year. Wow. You’d think the numbers alone would be enough to discourage them. Guess all we need to do sell more houses for more money
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There are a number of really great books about business strategy and the challenges of managment for high tech company (e.g. Crossing the Chasm, Innovator’s Dilemma, etc). What makes them great is that they provide a theory of business — they provide an analytical framework for understanding where your business is and a set of principles for guiding your future actions.

The problem with them is that people misunderstand the role of theory in business: they treat these theories like they are a set of rules — a formula for success — often at the encouragement of the authors of those books.

There is no substitute for first hand knowledge of your market and a detailed understanding of your business; no business strategy can truely be successful unless it has been informed and shaped by those factors. Theory should play a supporting role in the formation of strategy, not a determining one.

In fact, the misuse of theory is quite rampant. Beyond the books, there are folk theories about everything — why is Microsoft/Oracle/etc so successful, what makes open source so popular, etc. And it seems many people think that if they could simply repeat the formula, their business will be a success too (e.g. Sun seems to have a terminal case of Microsoft Envy).

The thing is, it wasn’t the formula that made Microsoft so successful, it was seeing that the time was right and that company was in the right position to play out a strategy like they did.

This really became clear to me when I was reading this summary of von Clausewitz, a 19th century military theorist. He was working in the time of the scientific revolution; there was a wide spread belief that it would soon be possible to reduce many fields to a set of governing rules. One school of military thought believed war would soon be reduced to a set of rules for maneuvering troops to achieve advantage.

Clausewitz opposed this school of thought arguing that theory existed not to proscribe behavior but merely to inform the thought of the general in battle. Great strategy came from great generals who had coup d’ oeil — the ability to read the state of battle in progress and intuitively see the opportunities it offered. Theory didn’t exist to be applied dogmatically, but simply to help develop the general’s coup d’oeil.

Do you think you could learn to be a chess grandmaster by rote learning of a collection of class openings and end games? Of course not — the number of possible chess games is far too large for that to be feasible as a chess playing technique. When they psychologists study chess grandmasters, to see what allows them to play such a computationally intractable game so well, one thing that stands out is their ability to very quickly read a board and understand it as a set of strategic groupings.

Why should business be different?

hm. I’m thinking about dusting off my blog and firing it back up. It’s become completely infested with comment / trackback spam. Guess I’ll have to rebuild it (better, stronger, faster).

I followed a link from Due Dilligence to an excellent article in Wired on how media-based business (music, books, movies, etc) is fundamentally transformed by the ability to keep *everything* in stock and deliver it for almost nothing. When you can aggregate all of that demand, there is some demand for virtually everything. In fact, it turns out that there is more money to be made on the low-demand things than on the high demand things, in aggregate. This demand has previously gone unmet because it was never possible for physical stores to meet that need conveniently.

I have long suspected this was the case — but this article makes the case very compellingly and backs it up with real world examples of the long tail in action.

Ironically, this is a business that P2P can’t touch. P2P networks are great at finding things common within the network. When the thing you want is rare, the chance that a peer that has it will see your request is fairly small. And the chances get slimmer when you remember that many P2P clients are only occasionally connected, many are freeloaders that don’t or can’t serve their music, or and many don’t have enough bandwidth to give reasonable service. While P2P is a convenient way to get popular things free, it sucks for obscu re stuff — in theory and in practice.

So, it’s not that there isn’t big business to be had in digital media on the Internet, it’s just that it’s fundamentally a different business. In the physical world, media companies are star makers. They select an artist from the talent pool, then invest heavily in production and promotion to turn that artist into a popular phenomenon. The promotion is key — it’s what boosts demand to a level where WalMart can get the inventory turnover it needs to justify giving the album shelfspace.

On line, the business is knowing your product and knowing your customers, so that you can match customers to products that match their tastes, no matter how quirky. It’s a different business, but the rewards are bigger than ever.

In fact, if you can make money on the long tail, you don’t have to worry about losing the demand that P2P is good at meeting — the demand for the popular stuff.

WSJ.com has an article about coastal homeowners cashing out and using their profits to buy less expensive houses outright in less expensive markets.

The main justification for the current house prices that is given is the shortage of supply in hot housing markets. While I think that argument doesn’t have much merrit on its face, it’s worth pointing out that this is one way a supply shortage could reverse itself.

People make fun of Google’s “do no evil” motto. But, in their case, its not just ethics but good business. Google lives and dies by the good will of its users and customers — none of whom have, in a practical sense, very strong lock in to Google’s technology. At the same time, much of the low hanging fruit for a search company like Google, involves doing kinda creepy things (like pay-for-placement, selling data mined from users, etc) . In order to last and avoid the fate of their predecessors, they have to walk a fine line — “Do no evil” seems like an excellent guide.

Thanks to a Web Alert over at Google, I’ve been reading just about every article printed on housing prices in the Bay Area. After you’ve read a dozen or so, you begin to see a pattern — an economist will say the values in the market have departed from fundmentals; a realtor or someone from a realtor association will sat “no they haven’t – there are more buyers than houses for sale”. In other words, scarcity is all that matters.

Well, now even the realtors ar forced to concede there is more than one force at work in setting house prices; and that a new one is about to start exerting itself:

The tide seems to be turning in the coverage of housing — from “oh my gosh, those crazy house prices just keep on climbing” to “ok, we all know this isn’t real”.

My friend Chris Fry has finally setup a blog. I am looking to forward to seeing some interesting content on XML and Web Services from the front line.

I’ve updated the made feed on this site to use Feedburner — mostly to see what the service could do for me. Seems like a neat idea, but none of the current features seem like “must have” things.