echovar

Jets and Sharks. Microsoft and Google. Just play it cool, boy.

Before the turn of the millenium, back when I was first joining an investment bank, I wanted to do some background reading. One of the must-reads was Michael Lewis’s Liar’s Poker. Of course, we were looking at disrupting the business. But in the over-heated world of the Internet IPO, no one wanted to disrupt anything– there was too much money at stake. Like all bubbles, that one eventually popped.

Our firm had a small part in popping that bubble with a piece of research we produced called “burn rate.” The first crop of Internet companies went public very early in their lifecycles. That meant they had to report their financials quarterly. At a certain point it was a simple matter of looking at cash versus run rate to determine how many months these firms had left. In Internet Bubble 2.0, initial public offerings were not possible, but the principle of burn rate remains the same. If a firm is not at, or close to being cash flow positive, they’re burning cash. This time the fires are behind closed doors, but their burning just as brightly.

But the Internet Bubble is nothing compared to the Real Estate / Sub-Prime Bubble. While trying to get my hands around this Bubble and Collapse, I turned to Michael Lewis again. Lewis’s article, “The End,” in the December issue of Portfolio nails it. The Sub-Prime meltdown is difficult to understand. And when people talk about the “bailout,” it’s hard to understand what exactly needs to be bailed out. Treasury Secretary, Hank Paulson, has come under criticism because he’s perceived to be playing whack-a-mole with the crisis.

Lewis takes a simple approach to explain the situation. He looks at the other side of the trade. Every trade requires a buyer and a seller. While the vast majority of the nation and Wall Street were buying in to the idea of ever rising real estate values, Steve Eisman, of FrontPoint Partners, was shorting the bubble. The article exposes the transubstantiation of BBB rated debt into AAA rated debt. As Eisman struggles to understand the trades he’s making, we start to understand the Doomsday Machine that Wall Street was constructing. For the bubble to keep expanding, it was important that the emperor was percieved as being fully clothed and regal. People like Peter Schiff were laughed at for trying to seriously address the problem. Risk is at the heart of investing, but in the real estate bubble, risk was grossly misrepresented. The label on the box said it contained wholesome ingredients, higher return with less risk. It was too good to be true, and it was. Bubblicious.

Lewis closes the loop by having lunch with John Gutfreund. Gutfreund was the CEO of Salomon Brothers while Lewis worked there. Liar’s Poker chronicles that time. They were the first i-Bank to go public, created the mortgage-backed security and their BSD’s from the bond arbitrage group went on to found Long Term Capital Management. Investment Banks follow the Golden Rule, he with the most gold makes the rules. Lewis posits that this is the end of investment banking as we know it.

Somehow I can’t even imagine an app like this for the Blackberry. With the advent of Google’s voice-based search and Smule’s Ocarina, the iPhone changes the whole dynamics of human-computer interface. The range of gestures and inputs change dramatically with the microphone, camera and acceleromoter. Machines have learned to understand more than mouse and keyboards. It’s not a phone, phones don’t do this kind of thing. The street, definitely, finds its own uses for things.

Saying that “Track” is expensive is another way of saying that it’s risky. It’s saying you haven’t solved enough of the technology problem to proceed. Given the circumstances, the current price is too high for the projected revenue.

However, the absence of track isn’t a static problem. A moment will arrive when a player will take the plunge and dominate the market. They will have put enough of the pieces together to see how the story ends. The first one in will have access to the most information about what track means, how to implement it and how people use it. That means they’ll be able to optimize the service faster than followers in the space. As time passes, the price of the technical solution will go down, the revenue opportunities will go up and cash flow will move from investment to revenue.

The question is, at what point do you enter the game? Can you wait for a set of economics that are cash flow positive? Of course, by then, usually the game is over. Unless of course, there’s only one player in the game. Then the cost of waiting is zero. Riskless competition isn’t competition.

This is a beautiful example of extending the use of an instrument beyond original intensions. Eric Roche’s arrangements for solo acoustic guitar are a thing to behold.

In trying to understand something like “Track,” I find that as a new angle is uncovered I need to make note of it before it slips back into the aether. Part of understanding is explaining something to yourself, and then trying to explain it to someone else. It’s turning a shard of a mental image into a story. Understanding the signal-to-noise ratio in that transmission is one measure of success. Sometimes a transmission can carry the payload of a dense and ambiguous metaphor– something that is neither signal nor noise.

Noise is something we can’t or don’t want to understand. Signal is communication for which we already have a framework for understanding. Ambiguity is a different kind of payload in a signal. Sometimes it’s important to drive toward clarity, other times it’s important to let something remain in an ambiguous state and allow for the meaning of play and play of meaning to unfold. The usefulness of track is something largely undiscovered. The tools we use to track the idea of Track are both primitive and highly sophisticated. We talk to each other; we listen; and then we talk to each other some more.

The small piece of the picture that came into focus for me today was the distinction between “who” and “what.” Distinguishing “track” and “search” seems to have some conceptual value. Search is more associated with what; track is more associated with who. Either can be used for the purposes of the other, but there’s some value in making this distinction.

There’s a sense in which track can be used to understand the current presence status of a person on the Network. We use a status indicator on IM to indicate to our personal network of reciprocal connections our level of availability. Tracking a person or a topic keyword tells you who is currently speaking on the Network. Who, not what. Speaking, through microblogging (tweeting), is a form of indicating your presence and availability.

An essential component of track is its basis in the real-time stream. One way we make conversation is through making sounds– and sounds have a physics. Finding the presence of speakers must occur within the context of the sound envelope– track must do its work in the period starting at the end of the sustain and finishing at the end of the decay.

The decrease in amplitude when a vibrating force has been removed is called decay. The actual time it takes for a sound to diminish to silence is the decay time. How gradual this sound decays is its rate of decay.

Once the sound envelope has completed its decay, the presence of the speaker can no longer be assured.

A directed social graph, or affinity group, can be followed to understand current presence status. Track can also be used for that purpose, and additionally to discover new speakers on the subject of one’s affinity. Condensing value out of that stream returns us to the beginning. A story emerges, a melody emerges– from the attack, sustain and decay– of the voices in the stream. A thousand flowers bloom in an eternal golden braid.

The narrative is told from the perspective of Good in the story of Good versus Evil. Genius resides in neither one side nor the other. Matter and Anti-Matter, two energies that can’t occupy the same world. It’s the idea of Manichaeism, the world is a battle between darkness and light.

Think about the difference between that frame and the cultural value of Monopoly versus Competition. Instead of a zero-sum game, the game requires two well-matched opponents. It’s the difference between a finite game and an infinite game. In an infinite game, the rules of the game are changed to extend the game to infinity.

The recent Internet Identity Workshop ended on a high note with many of the participants saying it was one of the best identity events in years. While there many moments of discovery, I had a vaguely uncomfortable feeling about the discussion. In that respect, my feeling was not in sync with the general mood.

I had the opportunity to chat with Kevin Marks, David Recordon and Steve Gillmor about the state of the “Open Stack” and the overall roadmap for OpenID. You can view the conversation on TechCrunchIT. Kevin does a great job of advocating for the Agile / Extreme Programming approach to engineering an open standards approach to “identity.” His approach advocates building the smallest useful piece in an open standard that can inter-operate with the other parts of the open stack. Kevin uses the elegant phrase: “the pieces become composable.” A software engineering project can use the parts that make sense for the task at hand.

While building the “smallest useful piece” allows one to focus on a “do-able task” within the large primordial soup of identity, it does need to unfold within a general roadmap to really be considered “useful.” Recordon offered the observation that no company wants to reveal its product roadmaps. I imagine steps that don’t betray direction.

Becoming an OpenID provider doesn’t really change the status quo. It gives millions of users an OpenID, but not many of them know what that means. Smaller websites becoming relying parties doesn’t change the balance of power. Is the destination a world wide web where I can use my Microsoft credentials to log in to Google? Will we arrive at a place where any credential set can be offered up at any website for the purpose of user authentication. Many small websites are becoming relying parties, not that there’s anything wrong with that.

Users rejected the idea of a single platform providing an identity model for the entire Network. Reviewing the goals and objectives of Hailstorm, it shows a strong resonance with today’s Identity community.

“HailStorm” is designed to place individuals at the center of their computing experience and take control over the technology in their lives and better protect the privacy of their personal information. “HailStorm” services will allow unprecedented collaboration and integration between the users’ devices, their software and their personal data. With “HailStorm”, users will have even greater and more specific control over what people, businesses and technologies have access to their personal information.

“HailStorm” technologies help simplify the way people use technology. Instead of concentrating around a specific device, application, service or network, “HailStorm” services are oriented around people. They give users control of their own data and information, protecting personal information and requiring the consent of the individual with respect to who can access the information, what they can do with it and how long they have that permission to do so.

There’s a sense in which the Open Standards Identity Stack is trying to recreate Mark Lucovsky and Bob Muglia’s vision with composable parts. At the time, no one could parse the language coming out of Microsoft. The concepts couldn’t bridge the gap in trust, and perhaps it was the wrong architecture in which to build that vision. Perhaps Live Mesh will fair better than Hailstorm, this time Microsoft is more in tune with the ocean in which it swims and has embraced the ideas of Open Standards and composable parts within the Network.

The current Identity movement thrives on the ambiguity of the concept. There’s a lot of room to move and therefore a lot of terrain to discover. The more I think about Identity, the more the concept of Difference forces its way into the conversation. Perhaps we call it entropy, change or time; but Differance is at the core of what we call life. And even Identity has Difference hidden within its shadows. The depth of identity does not reside with the proposition A = A; but rather in the idea that A is A. “A” is the “A” that flows through the real-time stream and is utterly changed and somehow still the same.

…to sleep, perchance to dream…

This afternoon I took a drive over to the Presidio to see Andy Goldsworthy’s sculpture called “The Spire.” Kenneth Baker of the SF Chronicle described it:

“Spire” consists of 37 steel-armatured cypress tree trunks, felled as part of the Presidio’s re-forestation program. The structure’s core sits below ground in a metal sleeve enclosed in a massive reinforced concrete base.

The project isn’t complete yet; it is still under construction, fenced off and surrounded by bulldozers and other heavy equipment. Even at this stage, it’s an impressive site. A spire generally sits atop a building as a kind of ornament. Goldsworthy’s Spire sits on the earth, among trees both young and old. Wikipedia describes spires:

Symbolically, spires have two functions. The first is to proclaim a martial power. A spire, with its reminiscence of the spear point, gives the impression of strength. The second is to reach up toward the skies. The celestial and hopeful gesture of the spire is one reason for its association with religious buildings. A spire on a church or cathedral is not just a symbol of piety, but is often seen as a symbol of the wealth and prestige of the order, or patron who commissioned the building

Goldsworthy says that he hopes he can give this single spire some company in the near future.